Archive for October, 2009

To say that I think a lot about recruiting and hiring is an understatement. Before I co-founded a technology company that builds recruiting software, my business partner and I, started and ran a couple of recruiting firms, an RPO and over the years, managed dozens of corporate recruiting departments. In addition to helping countless other organizations hire, we’ve had to build quite a few of our own teams. Along the way, we’ve developed a successful interviewing methodology that we’ve employed both internally and externally for dozens of our clients.

While hiring is one of the most dynamic business processes, one variable remains constant. Identifying the right people for skilled jobs is difficult. A modern workforce strategy should look not only to increase its hiring throughput, but also look to increase retention and develop lower-skilled employees into higher-skilled and more valuable ones. A well-run interview process won’t just reduce the risk of a bad hire it can also reduce the complexity and number of hires needed in the future.

A well-run interview process won’t just reduce the risk of a bad hire it can also reduce the complexity and number of hires needed in the future.

Ability at the Center

Ability is the primary element of modern workforce strategy. The ability, or skill, of the individuals you hire and employ determines your company’s ability to execute. If you run an accounting firm and do not have people with tax preparation skills you can’t do tax preparation for customers. All of the components that compose your human capital strategy, retention, development and acquisition are related to the amount of ability your organization possesses and the amount it needs to reach its goals. You acquire ability by hiring, you develop ability by training, and you maintain ability by retention.

Retention’s Relation to Character

Obviously, retention reduces the number of people a company needs to hire. And your company’s retention strategy is tightly linked with the character of the individuals you hire. Character, as we will discuss later, is the answer to, “Do I want to work with this person?” If you ignore character screening in your interview process, then you can expect to injure retention. Companies screen for character, often times without really knowing it. This is why in small companies the CEO always conducts the final interview and in larger ones people much higher up the ladder like to interview every person in their department: they are making sure that the person will mesh with the culture and not cause retention problems.

Talent’s Relation to Development

Where retention reduces the number of hires required, employee development reduces the complexity of those hires and alleviates some of the pressure placed on the hiring infrastructure. Interviewing for talent correlates to your organization’s employee development strategy. Where ability measures what someone is able to do, talent measures potential. As we will discuss later, talent is the answer to the question, “Can this person grow with my company?” By effectively screening for and gauging talent in the interview process you will eventually reduce the specialization level of future openings. The less complex an opening is the more people that can do the job and the less it costs to fill.

Making the Determination–Interviewing For Ability, Talent and Character

When we interview we are trying to create a hypothetical environment to mimic a real-world situation. This simulation will hopefully enable us to reduce the risk of making a bad hire by giving us a fair estimation of the candidate’s performance in our real-world environment. What measurements will give us the best prediction of performance? The three critical measurements are:

Ability: “Can the person do the job they are interviewing for today?”

Talent: “How well does this person fit our long-term objectives?”

Character: “Do we want to work with this person?”

What is Ability?

Ability is the measure of a person’s skill and experience and correlates to a job description’s “must haves”. When a company interviews for ability, they are trying to determine if the person can accomplish the minimum requirements of the position. The simplest question to ask is, “Can the person do the job?” Another, perhaps more concise question is, “Can the person be effective in this role immediately?”

Ability determines the execution ability of a company. To slightly oversimplify, the more ability a company’s workforce maintains the more it can get done. Of course, ability is affected by things like work ethic and decision making. But in theory, a company with three software developers can write three times more code than a company that has one software developer.

For some jobs, ability level might be the only concern: “Can they cut down a tree?” For others positions, and this depends on the job as well as the company, there are two other measurements—talent and character. Knowledge workers require high degrees of skill but also high quantities of talent and character. For example, hiring someone to flip burgers may only require the ability to flip burgers since it does not require a great deal of talent or character. On the other hand a Vice President of Marketing requires ability, but talent and character are probably just as important.

Since skill and experience are largely objective measurements, ability is then the easiest and least expensive to identify. “Is the person ethical” is a much more subjective and nuanced question than, “Can the person write HTML?” Since the latter measurement is largely objective we can use lower-cost resources (lower-level employees) to measure ability. Once we have inexpensively confirmed that the person has the skill to accomplish the job responsibilities we can move to more subjective questions that require more adept interviewers.

Ability First

Only after the interview process has determined the ability level of a candidate is adequate should we focus on the more costly measurements of talent and character. If the person can not do the job there is no reason to confirm whether they can grow with the job or if they fit the corporate culture. Perhaps this sounds strong. But for both candidate and company alike, spending time in interviews that test for cultural fit and growth potential before we know if they can do what is required of them day-one is a waste of everyone’s time. Thus, the first step in the interview process should be to gauge ability level; it is the easiest and cheapest to identify and a “must-have” requirement.

What is Talent?

“How well does this person fit our long-term objectives?” This is an appropriate way to correlate talent’s importance to interviewing and hiring. Every company has immediate needs, and those immediate needs, like tax preparation or Java coding, are what we look for in ability. Talent optimizes these abilities and it should also map to long-term corporate objectives, like managing teams or launching an office.

In older economies talent had some importance but perhaps not as much as skill (if you need someone to chop down a tree, do you need them to design a saw as well?). In knowledge-worker organizations problem solving and decision making are often as important as skill.

If you map talent acquisition to corporate development objectives you can actually build the higher-value employees in your company instead of hiring them from outside. Look at why some companies hire college recruits: the ability requirement is low, but they hope to build ability through talent development. For companies like consulting firms and investment banks it is more effective to build the talent for five years then to recruit someone with five years of experience. In many industries we simply do not have the luxury of a five-year training window—so we can not solely screen for talent.

Talent can be measured with behavioral and problem-solving questions. Behavioral questions measure a person’s past performance in certain situations, which give us a measure of their decision-making abilities. It takes a skilled interviewer and appropriate content to drive this stage of the interview cycle. If you ask someone to name a time they were given a project with little supervision or resources and how they dealt with it, you get a very subjective response.

Talent Second

Talent is more difficult to identify than ability. Whereas ability measurements like skill-testing produce results that are easy to measure (it is easy to see that 2+2=5 is the wrong answer), talent measurements require more interactive open-ended questions. Not only do we need to spend more time with the applicant to gauge talent, we need a more skilled resource to measure it. Thus the measurement of talent becomes more expensive. However, talent is more easily identified than character so we should take care in identifying talent in the middle stages of the interview cycle. If the person does not fit our development strategy, does not solve problems well or makes bad decisions it is likely a waste of resources to see if they augment corporate culture.

What is Character?

“Do I want to work with this person?” “Will this person have a positive effect on our culture?” Both of these questions are appropriate measures of character’s value to the interview process. Like talent, character enhances the output of ability. Someone can be very skilled, but if they are difficult to manage then the value of their skill is reduced. Character also maps to broader human capital objectives in that it closely aligns with employee retention. If you hire disagreeable people your turnover is likely to be higher than average.

Character can be measured by behavioral interviewing questions and psychological testing. It is often not the response that is important, but the way the response is given. An answer that says “yes” but has associated body language that is contrary to the answer is a character “red flag”.

Character Last, but Always

Of the three, ability, talent and character, the nebulous nature of character makes it by far the most difficult to quantify. Due to this problem, the last stage of interviewing requires the highest value employees to competently measure character. In a well-run interview process we desire to reduce the risk of a bad hires as well as maximize the time and effort of employees. No one will say in an interview that they are not a hard worker or that they have a bad temper. In light of this, character should be measured near the end of the interview process by very adept interviewers whose opinion will be trusted.

In saying that character should be measured near the end of the interview process, we do not intend to say it should not be looked for earlier. Care should be taken at all stages to identify risk associated with character. Although we can tolerate some deficiencies in talent and skill, deficiencies in character are almost always a reason for a no-hire.

Don’t’ forget, candidates are interviewing your company too.

Marketing

Interviewing is certainly the process by which we make the determination to hire someone. However, there is also a critical component to this process—creating interest in potential employees. Just as bad filtration will lead to poor interview success (since we will be interviewing people that can’t do the job), a lack of effective marketing will lead to poor acceptance ratios in the Finish stage.

Every interviewer must understand that although the corporate goal is to reduce the risk of a bad hire, a candidate is trying to reduce their risk of taking a bad job. Therefore, companies must take care to provide information to the candidate that will reduce the perception of risk.

Marketing must be a component of all stages of the hiring lifecycle. At the “Face” stage, we can map marketing’s objectives to the interview triangle:

Ability: What will the candidate be doing? Why is this interesting?

Talent: What growth opportunities will the candidate have?

Character: Why should the candidate want to work for the company?

Effective marketing will answer these questions for the candidate as early in the process as possible and reinforce them at all stages. The later the stage in the hiring process when marketing actually begins the less effective it becomes. If you save your marketing punch for the closing stage of a candidate’s offer its reception will be lukewarm. Inserting a corporate spokesperson (ideally a future co-worker) into the interview process is highly effective in increasing offer acceptance ratios.

The company that provides the most information to a candidate in the hiring process will almost always beat a competitive offer.

Summary: Ability, Talent, Character

Ability

The “must haves” of a job

Enables business functions and execution

Mostly objective

Relatively easy to measure

Screened early in interview process

Talent

Optimizes ability (e.g. problem solving)

Maps to corporate employee development objectives

Objective and subjective

Difficult to measure

Screened at middle stages of interview process

Character

Optimizes ability (e.g. work ethic)

Maps to corporate retention objectives

Mostly subjective

Very difficult to measure

Screened at late stages of interview process but gauged at all stages

Credit where credit is due.

I, by no means, thought of this content alone. In fact, most of the original content was developed by Steve Hazelton, the CEO of Newton Software. While I delivered the content most of the time, Steve spent countless hours conceptualizing, revising and improving this interview methodology.

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It hit me just the other day when the candidate I was interviewing for a shift mechanic position for a client of mine showed up for the interview in a suit and tie—not the usual dress code for the occasional shift mechanic candidate I might see. Further discussion led me to discover that he was a young mechanical engineer who was more than eager to start out at the bottom of the plant’s pecking order. As we sat down together, he told me of his job hunt and why he was so excited by this opportunity. He had graduated in September of 2008 and was interviewing with a number of big companies looking for young engineers. However, all those companies who were about to make offers all stopped calling as soon as the reality of the recession hit in October. Suddenly, my young engineer found himself in a tough spot: little experience beyond one short summer internship and college loans that needed to be repaid. For the last year, he’s been desperately trying to find a job in his field while working as a landscaper. So, now, here he is: applying for a shift mechanic job—and glad for the opportunity. From the company’s perspective, they get a young mechanical engineer in a shift mechanic job where his knowledge and skills will prove more than helpful while they groom him for better things. From his perspective, this job represents stability and an opportunity to move up later when the opportunity arrives.

That same day I got a call from another plant within the same company. They wanted to know what to do about the three hundred people applying for the one job that they had advertised recently. They had been expecting their pre-recession response of a dozen or so applicants. Now what? This phone call wasn’t the first of its kind that I’d received over the last month or so. Oddly enough, all these callers saw this as a problem rather than an opportunity. Sure, from a practical standpoint, it raises some issues about how to handle the volume, and there is the implication that costs for screening will likely rise. However, all these people neglected to realize that the market—the labor one, that is—had turned in their favor. There are very good candidates out there now and they’re yours for the taking.

Let’s talk about this from the viewpoint of the “selection ratio.” The selection ratio simply refers to the number of people hired divided by the number of applicants.

Selection Ratio = # hired / # applicants

In other words, how many people do you have to look at before you hire someone? Is it one out of ten? (A selection ratio of .10). One out of twenty? (A selection ratio of .05). What is a good ratio? Well, it depends to a great extent on the nature of the job (how much knowledge or skill is required?) and how tough it is to find someone (are there a large number of people with that needed knowledge or skill?). The ideal situation (for the company, not the applicant) is to find yourself with a market full of people who have the skills you need in a particular job. In this instance, you’ll find that it is worth the extra effort to look at more people than usual, as you now have an opportunity to get the very best employee who has all the characteristics you’re looking for. For the extra money and effort you’re putting forth, the potential payoff in finding the “perfect employee” is well worth it.

In fact, the biggest problem you’re going to run into is the same one that I mentioned earlier: how do you sort through all of these applicants? Your best bet is to implement some sort of automated screening methodology. It could be as simple as a checklist of knowledge, skills and abilities that the person needs to have or a validated test that differentiates between strong and weak applicants. Regardless, the best move is to begin thinking now about automating that screening process. Chances are, your pre-October, 2008 selection ratio for a given job was a lot larger than it is today. And, more importantly, that ratio is going to get smaller until the floodgates open and the market swings back in the other direction.

Bottom-line:
(1) If you can afford it, consider filling some of those highly skilled positions sooner rather than later—before everybody else starts calling them.
(2) If you can’t afford to start hiring now, get a head start by putting a screening process into place, and really begin thinking about how to take advantage of this buyer’s market.

About Dr. Gary Kustis

Dr. Gary Kustis works for The Aldridge Group, a management consulting firm specializing in the selection and development of employees. He has worked with a variety of companies in their efforts to build legally defensible selection systems that add value to the bottom-line. Gary has a Master’s in Industrial Psychology and a Ph.D. in Business.

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Many will agree, it appears the economy is defrosting and we are seeing the first green shoots of a recovery in recruitment outsourcing industry. Recently, I’ve read several optimistic blog posts written by firms and individuals that offer hourly and project based recruiting services. While obviously still cautious, all are indicating a recent uptick in their businesses. Some even claim to be busy.

Recruiting outsourcers were among the hardest hit last year when the economy officially stalled. “It was like someone flipped a light switch last October”, said Michelle Rich, a Bay Area technical contract recruiter who is currently working 7 openings. “The work just dried up all of a sudden.” For those of us that survived the implosion of the tech bubble earlier this decade, this pattern comes as no surprise. Unfortunately, contract recruiters and recruiting outsourcers are historically the canneries in the coal mine.

The upbeat outlook of hourly recruiters appears to be substantiated. September figures published by the Recruitment and Employment Confederation (REC) and KPMG showed the first rise new starts for permanent hires in 17 months. Temporary and contractor hours, often seen as a barometer of the health of the recruitment industry, are up nearly 30% since the beginning of the year. At my company, Newton Software, aprovider of applicant tracking sofware, we’ve added more customers in the last 6 weeks than we did the first 4 months of the year. Nearly40% of our new clients employ either an individual contract recruiter or some sort of hourly recruiting service to manage the recruiting process. And, more and more, we are hearing about our friends and contacts in the contract recruiting sector landing new assignments, a trend that we hope continues into the holidays and beyond.

So, what gives you ask? Why are the recruiting outsourcers seeing increased activity? Jonathan Chenard, GM of the Union Hill Group, a firm that provides hourly contract recruiting services and customer of ours sums it up pretty well in his most recent recent blog post .
• Employers don’t want to commit to a full time recruiting resource – yet.
• HR is getting hammered with resumes and now that there are jobs to fill, they need recruiting support.
• Employers are looking to do things as inexpensively as possible and hourly recruiting is a cost efficient and often effective.
Jonathan also points out that HR groups have gotten lean over the past year and are being asked to do more with less. Hourly recruiting services offer more flexibility and cost controls to HR folks looking to manage recruiting programs that are as dynamic as ever.

I’ll be the first to admit, times aren’t great yet. Many predict that the recovery to be jagged and slow. But, there are signs, both anecdotal and data driven, that show the worst is most likely over. For the recruitment outsourcers, it appears the growth cycle has begun and if history repeats itself, they will be the first in the recruiting industry to fully recover.

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